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Fantasy Football Insurance: Stupidest Money Move Ever?

Covering your NFL fantasy team for injuries isn't the only way people have wasted money on insurance.

The primary purpose of buying insurance is to protect you against losses that could crush you financially. By that measure, the latest trend in insurance doesn't make the grade -- unless you're betting a whole lot more on your NFL fantasy team than you should.

Fantasy football has become a big-money pastime, with an estimated 25 million fans participating. High-stakes leagues can have entry fees exceeding $1,000. But even in free leagues, the costs of player information guides, subscription-based scouting services, and other types of paid advice and tracking services add up. Players spent $1.67 billion last year on those services, according to information collected from Fox Business from the Fantasy Sports Trade Association.

With so much money at stake, insurance companies have jumped on the bandwagon, offering policies designed to pay out if certain players get injured. One company offers payouts of up to $1,000 if selected top-100 players miss more than eight or nine games of the regular season, depending on the structure of your fantasy league. What you'll pay in premiums depends on how injury-prone a particular player is, ranging from 9% to 13% of the coverage amount.

That's a lot to pay for coverage that might not get the job done. With some key players, all it takes is missing a game or two to cost you a chance at league victory. But if your player doesn't actually miss all those games -- even if he doesn't perform up to par -- then that coverage won't do diddly-squat to ease your financial pain.

Other stupid insurance movesFantasy football insurance isn't the only silly insurance product ever conceived of. Plenty of silly types of coverage have been offered over the years -- many from sellers that aren't, in fact, insurance companies -- and even gotten their fair share of buyers.

Scared that aliens will come to take you away? For more than 25 years, the St. Lawrence Agency has offered $10 million in UFO abduction insurance coverage for the lifetime price of $9.95. But don't take it too seriously; company president Mike St. Lawrence says that any payout would be pay out at $1 per year for 10 million years.

Worried that a meteor will crush your home? You probably don't need separate insurance, as your homeowners policy will typically cover falling objects like meteors or asteroids that directly hit your home. If a nearby hit causes shockwave-related damage, though, you could be out of luck.

Has watching too many episodes of The Walking Dead made you nervous about zombie attacks? ZAICO claims to offer insurance against losses from Class 3 zombie outbreaks, including the cost of replacing guns and ammunition, medical treatment, and incinerating dead zombies. At $14.95 per year, ZAICO thinks peace of mind is worth the cost.

Kidding aside, many legitimate companies have made questionable decisions about insurance. One of the best examples involves PepsiCo (NASDAQ:PEP), which ran a promotion in 2003 offering a potential $1 billion payout to a contest winner. The odds of the billion-dollar payout were 1 in 1,000, but rather than taking on the potential liability risk itself, PepsiCo turned to Warren Buffett and Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), which was happy to accept payment of an undisclosed amount somewhere between $1 million and $10 million to take on the risk. In the end, no payout was made, and Berkshire happily pocketed its premium.

Be smart with your moneyFantasy football is a fun pastime, but when it gets so serious that you feel like you need to buy insurance to protect yourself from disappointment, you need to ask yourself whether you've gone past simple fandom. Save your money for insurance that will actually protect you from importantand potentially devastating losses, and you'll have more money to save for a rainy day -- or to buy another fantasy-player guide.

Author

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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